Question 1 Mary Montpier, CFA, is an equity analyst located in the Malaysia office of World Class Advisers. The firm provides investment advice and financial-planning services globally to institutional and retail clients. The Malaysia office was opened last year to provide additional international investment opportunities for U.S. clients. Montpier covers small-cap stocks in the region. Montpier’s supervisor, Rick Reynolds, CFA, works in New York. Jim Taylor is an analyst in New York who works at World Class Broker-Dealer, a sister company of World Class Advisers. Taylor covers health-care and biotech stocks for the firm. Taylor recently completed Level I of the CFA examination and is registered for the Level II examination next year. Taylor works for John James, CFA. Through her interaction with other analysts in Malaysia, Montpier learns that the use of material, nonpublic information is common practice in analyst research reports and recommendations, and is not prohibited by law in Malaysia. Montpier has acquired material, nonpublic information on the research pipeline of Circuit Secrets, a Malaysian semiconductor company. The nonpublic information makes the company seem like a fine investment. After extensive research through traditional means, Circuit Secrets appeared to be fully valued relative to its growth potential – until Montpier found the nonpublic information. In preparation for a client meeting, James asks Taylor to prepare a research report on attractive companies in the health-care industry. Since Taylor is busy preparing for company conference calls, James tells him to “throw something together.” To meet James’ request, Taylor obtains reports on Immune Health Care and Remedy Corp., two companies that he likes, but has not researched in depth. Taylor takes the original reports, which were prepared by a small brokerage firm in the Netherlands, adds some general industry information, incorporates World Class’s proprietary earnings-growth model, and submits “strong buy” recommendations to James for the stocks. Although written procedures require James to review all analyst reports prior to release, time constraints consistently prevent him from reviewing the reports prior to distribution. Montpier is proud of her CFA charter. In fact, she often boasts that she is one of the elite members of the CFA Institute that passed all three exams consecutively without failing. Taylor is also proud of the CFA program. He told his friends and family the CFA designation is globally recognized in the field of investment management and research. Furthermore, Taylor states that he believes the program will enhance his portfolio management skills and further his career development. In her free time, Montpier has begun consultation for members of a local investment cluB.The club is in the process of developing an appropriate compensation package for her services, which to date have included financial-planning activities and investment research. Montpier informs the investment club that she has a full-time job at World Class Advisers, which offers similar services. The investment club gave Montpier written permission to consult for them despite her full-time work. To gain insight on biotech stocks, Taylor registers for an upcoming asthma study conducted by Breakthrough Corp., through which he and others will be the subject of testing for the efficacy of several new drugs. On his application, longtime asthma sufferer Taylor indicates that he has the appropriate medical condition for the study and signs a confidentiality agreement. During the study, a researcher shows Taylor a spreadsheet detailing the progress of Breakthrough’s research pipeline. Two of the new drugs on which Breakthrough is awaiting regulatory approval have serious negative side effects in patient testing. This information confirms suspicions Taylor had developed after extensive research and conversations with company executives regarding nonmaterial, nonpublic information, though he was not certain about the names of the drugs until he saw the spreadsheet. At the conclusion of the study, Taylor releases a report detailing the drugs’ side effects and recommends that clients “sell” Breakthrough Corp. Over the next two weeks, Breakthrough releases information that the drugs in question have been held up by a regulatory agency pending additional investigation. The stock plunges more than 30 percent on the news. Part 1)
Which of the following is a violation of the Code and Standards? A) | Reynolds approves Montpier’s report on Circuit Secrets immediately, but tells his traders to wait a week before buying the stock themselves. | B) | James has dinner with Taylor and promises to provide Taylor with three weeks off in May to study for the CFA exam and offer some test-taking tips. | C) | Taylor sends out a resume referring to himself as a Level II CFA candidate and indicating his intention to take the Level II test in June. | D) | An intern at World Class takes a side job as a bartender on weekends to supplement her income. |
Part 2)
Which of the following statements about Montpier’s analysis of Circuit Secrets is TRUE? A) | Montpier could satisfy the requirements of Standard II(A): Material Nonpublic Information by producing a research report on Circuit Secrets for Malaysian clients, but not making it available to U.S. clients. | B) | If Montpier fails to use the nonpublic information, and as such is unable to recommend the company, she has violated Standard III(A): Loyalty, Prudence, and Care by failing to act in the best interest of her clients. | C) | Montpier’s best course of action is to initiate coverage of Circuit Secrets as a “hold,” and attempt to get the company to disclose the nonpublic information. | D) | If Montpier prepares a research report for all World Class clients recommending Circuit Secrets as a Buy, but does not reveal the nonpublic information, she has still violated Standard II(A): Material Nonpublic Information. |
Part 3)
With regard to Standard VII(B): Reference to CFA Institute, the CFA Designation, and the CFA Program: A) | neither Montpier nor Taylor is in compliance. | B) | Montpier is in compliance, and Taylor is in compliance. | C) | Montpier is not in compliance, and Taylor is in compliance. | D) | Montpier is in compliance, and Taylor is not in compliance. |
Part 4)
Which of the following actions could Taylor take to ensure he is not in violation of Standard I(C): Misrepresentation? A) | Initiate coverage of Immune Health Care and Remedy Corp. as holds, not strong buys, until he has time to do further research. | B) | Nothing, as the reports he used came from an international source, and are not protected under U.S. law. | C) | Just use excerpts from the original reports, rather than copying the whole reports. | D) | Base his report on information from Value Line and Standard & Poor’s reports rather than research from rival analysts. |
Part 5)
Which of the following statements regarding Standard IV(A): Loyalty to Employer is TRUE? A) | By accepting compensation for his role in the medical study, Taylor is violating the Standard. | B) | Despite getting written permission from her client to consult, Montpier is not in compliance with the Standard. | C) | Taylor’s use of rival analysts’ reports in his own research violates the Standard. | D) | Neither Taylor nor Montpier is in violation of the Standard. |
Part 6)
Taylor’s actions regarding Breakthrough Corp.: A) | do not violate Standard II(A): Material Nonpublic Information because he was only confirming what he already suspected. | B) | violate Standard II(A): Material Nonpublic Information because the information was not in the public domain. | C) | did not violate Standard I(D): Misconduct because he did not misappropriate the information. | D) | violate Standard IV(A): Loyalty to Employer because he is being compensated for the work. |
答案如下 Question 1 Part 1)
Your answer: B was incorrect. The correct answer was A) Reynolds approves Montpier’s report on Circuit Secrets immediately, but tells his traders to wait a week before buying the stock themselves. An immediate approval of Montpier’s report implies that Reynolds did not check the facts or talk to Montpier about the recommendation, which was dependent on the use of insider information. Reynolds violated the Standard relating to supervisory responsibilities. Side work that is not in competition with the intern’s firm is not a violation unless the side job interferes with her work for World Class. The statement on Taylor’s resume is appropriate, and James’ plans to help Taylor are well within the requirements of the Standards.
Part 2)
Your answer: B was incorrect. The correct answer was D) If Montpier prepares a research report for all World Class clients recommending Circuit Secrets as a Buy, but does not reveal the nonpublic information, she has still violated Standard II(A): Material Nonpublic Information. Standard II(A) prohibits not only the revelation of nonpublic information, but also trading on the basis of that information. The buy rating itself is a product of the nonpublic information, and as such is a violation. Montpier must comply with the Code and Standards regardless of the laxness of regulations in her country. If Montpier believes the stock is a buy, initiating it as a hold would be inappropriate. Analysts cannot be expected to have a recommendation on every stock, so failing to recommend a potentially good stock is not a breach of fiduciary duty. Part 3)
Your answer: B was incorrect. The correct answer was C) Montpier is not in compliance, and Taylor is in compliance. Both Montpier, as a CFA charterholder, and Taylor, as a CFA candidate, are subject to the Standards. Montpier violated Standard VII(B) by exaggerating the implications of passing the exam in three years. Taylor’s comments comply with the standard. Part 4)
Your answer: C was incorrect. The correct answer was D) Base his report on information from Value Line and Standard & Poor’s reports rather than research from rival analysts. Value Line and Standard & Poor’s are “recognized financial or statistical reporting services,” and, as such, can be used as the basis for reports without acknowledgment. Caveat: Those publications are copyrighted, and copying directly from them may be illegal in some circumstances, even if it does not technically violate the plagiarism Standard. Using excerpts is still plagiarism and changing the stock recommendation will not change that fact. It is unlikely that a Dutch research report would not be protected under U.S. copyright, and even if it were not, using the material without attribution still violates the Standard. Part 5)
Your answer: B was correct! Montpier needs to get permission from both the client and her employer before she can begin to consult. Thus, Montpier is not in compliance, as she has not received permission from World Class. Neither Taylor’s use of rivals’ research nor his participation in a medical study violate the Standard. Standard IV(A) addresses outside income, not research methods. And while the medical-study payment is certainly income, it is not in competition with his firm, and as such does not violate the Standard. Part 6)
Your answer: B was correct! Taylor’s use of the material nonpublic information provided to him in confidence by a researcher is a clear violation of Standard II(A). The professional-misconduct Standard prohibits actions that reflect negative on “professional reputation, integrity, or competence”. Since Taylor has signed a confidentiality agreement, his violation of the agreement definitely says something about his honesty. Thus, he is in violation of Standard I(D). Standard IV(A) only applies to work in competition with the employer. | 
发表于 2007-5-13 12:30
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